Why didn’t anyone tell me that DC is the most affordable city in America?

Such was one of the headlines of a summary article about a new report from the Center for Housing Policy and the Center for Neighborhood Technology.  The report’s title (Losing Ground: The Struggle Of Moderate-Income Households To Afford The Rising Costs Of Housing And Transportation) might not square with the idea of making places like DC and San Francisco the most affordable city in the nation. Indeed, the headlines popping up in my Google Reader window show the range of interpretation:

Now, granted, that middle Planetizen link wasn’t referring to this study, but to a GGW piece from the GMU Center for Regional Analysis. Still, the divergence among the headlines is interesting. CNT published studies in recent years aimed to demolish the idea of ‘drive ’til you qualify’, noting that the transportation costs embedded in those housing choices are large and do not favor autocentric suburbs. Since the gist of those studies were that the seemingly more expensive cities were actually more affordable, I guess the snap conclusion about affordability here makes sense.

But in reading the report itself, it’s clear that DC’s affordability is not the key finding here.  The report’s title should be an indicator of that (again, the title is “Losing Ground”).

That said, the critique of the report stems from the practice of defining each area’s affordability in relative terms to the area’s median income.  While this might make sense if looking at any one metro area in isolation (as in the previous studies on combined housing and transportation costs within metro areas), I’m not sure that it is the best way to compare different metro areas to one another. Matt Yglesias made this point:

By the same token, measuring affordability in H+T terms is a great idea, but presenting it in income share terms is misleading. In general, a person can increase his earnings power by leaving a poorer place for a richer one. […] But it turns out that for many Americans the productivity and wage gains involved in moving to a rich city end up being clawed back by a lack of affordable housing. So the tendency is only for the most educated people—the ones with the least objective need—to be able to take advantage of the migration possibilities. This is a huge social problem that contributes to stagnating living standards, and it’s totally obscured by saying that the DC area is affordable because it’s full of rich people.

In short: the fact that DC, SF, et al are ‘affordable’ because they are rich is not exactly a good thing.  For one case, see Ryan Avent’s 2011 NYT piece (preivewing The Gated City) on the impact of high housing costs on GDP; for another, see Binyamin Appelbaum in the NYT Economix blog on the impact of high housing costs on income inequality, and therefore on the overall economy:

A recent paper by researchers at Harvard University argues that the prohibitive cost of living in the areas with the greatest economic opportunities has forced low-wage workers to migrate instead to areas with inferior opportunities.

…

And here’s the crucial point: It doesn’t have to be this way. High housing prices are the result of public policies that discourage new development. Those policies are generally embraced by the residents of wealthy areas, who benefit, at least in the short term, from restrictions on the supply of new housing. But this paper is one more reason to worry about the long-term economic consequences.

The three animated charts accompanying the Harvard paper are illustrative. Meanwhile, the broad policy implications for the region can be summarized in the concluding paragraph of the GGW piece from George Mason’s CRA (linked above):

Most local governments are not planning enough housing for their future workers, and may hinder new housing with regulations on new development. Meanwhile, builders need to recognize the need for more multi-family housing and smaller, more affordable owner and renter homes in the region.